The Ticking €34 Trillion Timebomb

The Wall Street Journal ran an interesting article yesterday. It was about the ECB’s Outright Monetary Transactions or OMT program… the “unlimited” bond buying program the ECB announced last September and which supposedly “ended” the EU Crisis.

Here’s the key section from the article:

The positive effects of the Outright Monetary Transactions, or OMT, program are “already visible,” Joerg Asmussen, a member of the ECB’s governing board, said in testimony before Germany’s Constitutional Court. He added that the program is not aimed at replacing the market, rather to address aberrations, and is limited in scope.

“The design of the OMT makes it obvious that the program is de facto limited, for example by being restricted to short maturities and the therefore limited pool of bonds which can be bought,” he said.

So far the ECB hasn’t bought any government bonds under the OMT program, set up at last fall to lower borrowing costs for Italy and Spain and prevent them from have to leave the euro zone. The mere presence of the program been enough to calm bond markets worried about the countries’ ability to keep paying their debts.

So… Europe was “saved” by a program that hasn’t officially DONE ANYTHING? Put another way, the OMT program saved Europe simply by “existing?”

Folks, this is the clearest indication of total and complete insanity you will ever see: Central Bankers proclaiming that they saved a €17 trillion economy and €34 TRILLION banking system simply by announcing a program. Not actually doing anything, just announcing a program.

The insanity gets even worse… just a few paragraphs later, we find the following:

He [Asmussen] rejected criticism that the ECB is trying to artificially create interest rate convergence in the euro zone, which critics say would remove incentives from euro zone governments to reform their economies. Instead, he said, the ECB aims to curb “unjustified peaks” in euro zone bond yields.

For the program to be effective, he added, the ECB needs to send a “strong signal” that OMT bond purchases are unrestricted. He said there was no danger that the program, if deployed, would cause inflation.

Here we are told that the Europe which was allegedly already “saved,” will only truly be saved if the ECB can buy ANY and ALL EU sovereign bonds that it wants… Oh, and doing this won’t result in inflation…

It’s ironic because monetizing any and all bonds was precisely what caused Weimar Germany. The fact that the ECB wants to do this in order to curb “unjustified peaks” in totally bankrupt, insolvent EU sovereign nations tells you all you need to know about the EU…


1)   The Crisis is not over and will actually get even worse in the coming months.

2)   The folks in charge of solving the Crisis are either totally incompetent or liars.

3)   The EU is doomed.

The writing is right there on the wall for everyone to see: the EU was “saved” by a bluff. And now that it’s time to actually start putting figures to the proposal, ECB officials are lying through their teeth.

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Best Regards,

Graham Summers





Posted by Phoenix Capital Research